Dispute among partners of superluxe MoMA tower

A rift has opened between the partners that built the soaring ultra-luxury condo tower at 53 W. 53rd St.

Hines, Goldman Sachs, and the Singapore-based real estate investment firm Pontiac Land Group recently resorted to an arbitration process to resolve a dispute over how much the building's units should be discounted, sources said.

One source familiar with the situation said that the dispute stemmed from Hines wanting greater leeway to sharply slash prices at the 1,050 foot tall, Jean Nouvel-designed spire, where sales are widely regarded to be poor in a market saturated with newly-built, high-end offerings.

A spokeswoman for the project declined comment as did spokeswomen for Goldman Sachs and Pontiac.

The project, known as MoMA Tower because it is adjacent to the Museum of Modern Art and will include one of the museum's galleries in its base, has made several price adjustments since hitting the market almost four years ago, according to disclosures filed with the state Attorney General's office. In September 2018, just over $123 million of reductions were filed. In total, roughly $167 million of price cuts have been made by the developers since the tower's initial projection of more-than $2 billion in sales was disclosed in 2014.

Market experts say a general malaise has settled over the uppermost tier of the residential market in Manhattan. Because there is a large inventory of competing projects, such as units in 520 Park Ave., Central Park Tower, One57 and 100 E. 53rd St., condo buyers have felt less urgency to pounce on deals.

Observers also point to issues with 53 W. 53rd St.'s design, including a facade that includes structural columns that cut through windows and impede views.

"In a market where views and light are highly rewarded, you don't want to interrupt sight lines for any reason," said Donna Olshan, president of residential brokerage firm Olshan Realty. "I commend the developer for wanting to build something so artistic, but I'm not so sure of its market viability."

Olshan's firm, which tracks the high-end residential market, reported that prices for top tier apartments fell last year, continuing a years-long decline tied to several larger trends such as changes in the tax code that prohibit real estate tax deductions and a drop-off in foreign buyers. Olshan found that the number of contracts signed for condos costing $4 million or more fell by 10% year over year and that listings lingered on the market for an average 447 days, versus 433 days in 2017 and 318 days in 2016.

At least 15% of the 145 units at 53 W. 53rd St. are in contract, rendering MoMA Tower effective. Closings are set to begin in the spring, a spokeswoman for the project said.

Other buildings envisioned as ambitious entrants to the super luxury market have also failed to impress buyers. A conversion of the upper portion of the Woolworth Building to condos has closed only three sales according to property records, despite a sales effort that began several years ago. The 31-unit residential project, which goes by the address 2 Park Pl., is being developed by a partnership led by Alchemy Properties that, so far, has held firm on prices.

"Developments that came at the height of the market are now yielding to a softening market and it's an understood dynamic among builders that they're going to have to cut their pricing in order to sell," said Frances Katzen, a broker who leads her own sales team at Douglas Elliman.

Katzen said she recently worked on a project in Midtown where sales had been poor because the partnership of developers that built it could not agree on price cuts for the units.

"One developer wanted to reduce prices and finalize the sellout but the other sponsor had deep pockets and wanted it to sit," Katzen said. "So you're left with $150 million of unsold apartments that aren't going to move anytime soon."

Other buildings have defied the slowdown because of their amenities, unique location or a combination of both. 220 Central Park South, for instance, has sold strongly and at record prices, including the $238 million sale of its penthouse to the hedge fund manager Ken Griffin. Katzen said she recently concluded the sale of units at 108 Leonard St., where she said prices were raised four times during the marketing process and the total sellout was north of $600 million.

"Buyers are savvy and if a property is priced right, it moves," Katzen said.

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